Analysis

Q&A: Neil Thompson, dotbuiltenvironment - Construction’s payment utopia?

21 May 2017 | By Stephen Cousins

Neil Thompson, CEO of industry think tank dotBuiltEnvironment and former head of Digital Research and Innovation at Balfour Beatty, on the disruptive technology Blockchain and its potential to transform the way construction does business through greater transparency and efficiency.

What is Blockchain?

Blockchain is the technology that underpins the digital currency Bitcoin, a method of recording transactions, such as assets, agreements, or contracts, across a peer-to-peer network of computers around the world. 

Data is stored as “blocks”, bound together cryptographically and chronologically into a “chain”. The system is very transparent because anyone in the network can get access to the latest version of the digital ledger at any time and it cannot be altered or tampered with, only added to.

There are three generations of Blockchain applications: 1.0 is digital currency; 2.0 is smart contracts; and 3.0 is decentralised applications (Dapps), for example voting systems and patient records.

How can it benefit construction?

It could give complete transparency on where construction finances come from and what they are ultimately spent on. Using Blockchain could enable us to trace every pound from the pocket of the taxpayer to the pocket of the tradesman or end user, and see the complete chain of custody in between.

This transparency would help us measure value for money and return on investment, which, in turn, would help get projects financed. 

It could change way finances are managed. Currently, the way money flows through the supply chain is opaque and largely controlled by the client and tier one contractors, which has resulted in issues, for example suppliers going bust due to delayed payments.

If we try to pause payments for one week the entire payment system would grind to a halt. Using Blockchain, payment transactions could be triggered automatically based on certain conditions being fulfilled via a smart contract.

Can it really change things or is it all just hype?

As with many new technologies there is an element of hype and silver bullet syndrome. However, this really is a very simple and established technology and it's fairly straightforward from a coding point of view. What is a challenge is the impact it would have on established models of doing business and the adversarial nature of construction.

The way clients procure contracts sets the rules of the game and people behave adversely around those rules. Using Blockchain would fundamentally change that environment – to the point where we may see the end of contracts as we know them today. 

Interestingly, many thought leaders in construction today talk about trust. However, smart contracts are seen as “trustless” mechanisms to transact through. 

Could it have an impact on design and the sharing of project information?

Currently, a tier one contractor might have a common data environment for sharing project information, which creates a bottleneck as everything has to go via them, then out to the supply chain. In distributed peer-to-peer networks everyone holds a slice of the data on their own system and makes it available to everyone else on the network.

This transparent information transfer system gives everyone unbounded access to the latest version of information, plus a record of all data transactions, such as who had access, what they did with it and how they added to it etc.

Blockchain technology lowers the bar, in terms of the effort required by humans to understand and make decisions, which has the potential to democratise the design process. For example, we can get the public and end users directly involved in design decisions and track their satisfaction with the evolving asset in near-real time, instead of doing it in stages or having to wait until the project is completed to fix design flaws.

What work is dotBuiltEnvironment doing on Blockchain?

As a collection of thought leaders including lawyers, architects, engineers and software engineers, we are pooling our resources to create Blockchain prototypes for construction and identify platforms to test them out on. We have plans to turn these initial ideas into concrete projects/proof of concepts in collaboration with institutions and other organisations.

We are playing with two ideas. The first is ConstructCoin, a method of commoditising construction information. It aims to generate a market for construction information in the same way that value has been generated for using a digital currency.

Information costs money to generate, so why not create a system to reward the creator with payment? For example, a spreadsheet of construction info might include a line for data that costs £1 to produce, which the client could buy for £2 when it is completed. This approach could do a lot to incentivise collaboration. 

The second idea is a project banking app called TraderTransferTrust. Utilising the Blockchain’s consensus system and digital proof of work mechanism. Project payment systems can pay-as-you-deliver and ensure an optimum cash flow for construction buyers and suppliers. 

The Blockchain is not a flexible system that can fix any problem. For example, we don’t have to use the Blockchain to develop a supply chain payment app. However, the consensus mechanism of the Blockchain provides a unique opportunity to bring fair payment system to the industry.